UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the Quarterly period ended June 30, 2012
OR
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from to
Commission file number: 1-16239
ATMI, Inc.
(Exact name of registrant as specified in its charter)
|
|
|
Delaware
|
|
06-1481060
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
7 Commerce Drive, Danbury, CT
|
|
06810
|
(Address of principal executive offices)
|
|
(Zip Code)
|
203-794-1100
(Registrants telephone number, including area code)
Indicate by
check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
x
No
¨
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes
x
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act (Check one):
|
|
|
|
|
|
|
Large accelerated filer
|
|
¨
|
|
Accelerated filer
|
|
x
|
|
|
|
|
Non-accelerated filer
|
|
¨
|
|
Smaller reporting company
|
|
¨
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
¨
No
x
The number of shares outstanding of the registrants common stock as of June 30, 2012 was 31,939,724.
ATMI, INC.
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2012
TABLE OF CONTENTS
2
PART IFINANCIAL INFORMATION
Item 1. Financial Statements
ATMI, Inc.
Consolidated Balance Sheets
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
June 30,
2012
|
|
|
December 31,
2011
|
|
|
|
(unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
54,627
|
|
|
$
|
34,523
|
|
Marketable securities, current portion
|
|
|
67,198
|
|
|
|
75,632
|
|
Accounts receivable, net of allowances of $781 and $781, respectively
|
|
|
65,088
|
|
|
|
51,563
|
|
Inventories, net
|
|
|
81,515
|
|
|
|
73,622
|
|
Income taxes receivable
|
|
|
707
|
|
|
|
3,721
|
|
Deferred income taxes
|
|
|
5,404
|
|
|
|
4,409
|
|
Prepaid expenses
|
|
|
17,088
|
|
|
|
14,439
|
|
Other current assets
|
|
|
10,430
|
|
|
|
13,279
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
302,057
|
|
|
|
271,188
|
|
Property, plant, and equipment, net
|
|
|
117,079
|
|
|
|
116,275
|
|
Goodwill
|
|
|
46,252
|
|
|
|
46,546
|
|
Other intangibles, net
|
|
|
31,897
|
|
|
|
36,571
|
|
Marketable securities, non-current
|
|
|
7,485
|
|
|
|
3,329
|
|
Deferred income taxes, non-current
|
|
|
19,602
|
|
|
|
19,139
|
|
Other non-current assets
|
|
|
22,087
|
|
|
|
20,638
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
546,459
|
|
|
$
|
513,686
|
|
Liabilities and stockholders equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
31,208
|
|
|
$
|
20,779
|
|
Accrued liabilities
|
|
|
7,684
|
|
|
|
7,940
|
|
Accrued salaries and related benefits
|
|
|
6,267
|
|
|
|
10,469
|
|
Income taxes payable
|
|
|
8,358
|
|
|
|
1,229
|
|
Other current liabilities
|
|
|
6,421
|
|
|
|
4,539
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
59,938
|
|
|
|
44,956
|
|
Deferred income taxes, non-current
|
|
|
132
|
|
|
|
162
|
|
Other non-current liabilities
|
|
|
18,710
|
|
|
|
18,237
|
|
Commitments and contingencies (Note 8)
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, par value $.01 per share: 2,000 shares authorized; none issued
|
|
|
|
|
|
|
|
|
Common stock, par value $.01 per share: 100,000 shares authorized; 40,191 and 39,912 issued and 31,940 and 31,718 outstanding in
2012 and 2011, respectively
|
|
|
402
|
|
|
|
399
|
|
Additional paid-in capital
|
|
|
449,933
|
|
|
|
444,642
|
|
Treasury stock at cost (8,251 and 8,194 shares in 2012 and 2011, respectively)
|
|
|
(232,439
|
)
|
|
|
(231,173
|
)
|
Retained earnings
|
|
|
243,699
|
|
|
|
228,414
|
|
Accumulated other comprehensive income
|
|
|
6,084
|
|
|
|
8,049
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
467,679
|
|
|
|
450,331
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
546,459
|
|
|
$
|
513,686
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
3
ATMI, Inc.
Consolidated Statements of Comprehensive Income
(unaudited)
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
2012
|
|
|
2011
|
|
Revenues
|
|
$
|
105,899
|
|
|
$
|
104,027
|
|
Cost of revenues
|
|
|
52,425
|
|
|
|
54,565
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
53,474
|
|
|
|
49,462
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
13,825
|
|
|
|
14,251
|
|
Selling, general and administrative
|
|
|
22,713
|
|
|
|
19,763
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
36,538
|
|
|
|
34,014
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
16,936
|
|
|
|
15,448
|
|
Interest income
|
|
|
305
|
|
|
|
289
|
|
Other expense, net
|
|
|
(457
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
16,784
|
|
|
|
15,729
|
|
Provision for income taxes
|
|
|
5,361
|
|
|
|
4,595
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
11,423
|
|
|
$
|
11,134
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share basic
|
|
$
|
0.36
|
|
|
$
|
0.35
|
|
Weighted average shares outstanding basic
|
|
|
31,938
|
|
|
|
31,665
|
|
Earnings per common share diluted
|
|
$
|
0.35
|
|
|
$
|
0.34
|
|
Weighted average shares outstanding diluted
|
|
|
32,669
|
|
|
|
32,328
|
|
Comprehensive income
|
|
$
|
13,083
|
|
|
$
|
12,894
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
4
ATMI, Inc.
Consolidated Statements of Comprehensive Income
(unaudited)
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2012
|
|
|
2011
|
|
Revenues
|
|
$
|
198,473
|
|
|
$
|
204,751
|
|
Cost of revenues
|
|
|
100,817
|
|
|
|
107,198
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
97,656
|
|
|
|
97,553
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
28,314
|
|
|
|
27,702
|
|
Selling, general and administrative
|
|
|
46,259
|
|
|
|
42,745
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
74,573
|
|
|
|
70,447
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
23,083
|
|
|
|
27,106
|
|
Interest income
|
|
|
630
|
|
|
|
713
|
|
Other expense, net
|
|
|
(763
|
)
|
|
|
(132
|
)
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
22,950
|
|
|
|
27,687
|
|
Provision for income taxes
|
|
|
7,665
|
|
|
|
8,546
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
15,285
|
|
|
$
|
19,141
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share basic
|
|
$
|
0.48
|
|
|
$
|
0.60
|
|
Weighted average shares outstanding basic
|
|
|
31,873
|
|
|
|
31,674
|
|
Earnings per common share diluted
|
|
$
|
0.47
|
|
|
$
|
0.59
|
|
Weighted average shares outstanding diluted
|
|
|
32,683
|
|
|
|
32,325
|
|
Comprehensive income
|
|
$
|
13,320
|
|
|
$
|
24,099
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
5
ATMI, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Treasury
Stock
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
Comprehensive
Income
|
|
|
Total
|
|
Balance at December 31, 2011
|
|
$
|
399
|
|
|
$
|
444,642
|
|
|
$
|
(231,173
|
)
|
|
$
|
228,414
|
|
|
$
|
8,049
|
|
|
$
|
450,331
|
|
Issuance of 33 shares of common stock pursuant to the exercise of employee stock options
|
|
|
1
|
|
|
|
555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
556
|
|
Issuance of 8 shares of common stock pursuant to the employee stock purchase plan
|
|
|
|
|
|
|
146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
146
|
|
Purchase of 57 treasury shares
|
|
|
|
|
|
|
|
|
|
|
(1,266
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,266
|
)
|
Stock based compensation
|
|
|
|
|
|
|
4,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,384
|
|
Income tax benefit from stock based compensation
|
|
|
|
|
|
|
208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
208
|
|
Other
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,285
|
|
|
|
|
|
|
|
15,285
|
|
Reclassification adjustment related to marketable securities sold in net unrealized loss position, net of $504 tax
provision
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
869
|
|
|
|
869
|
|
Change in fair value on available-for-sale securities, net of deferred income tax of $744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,290
|
)
|
|
|
(2,290
|
)
|
Change in fair value of derivative financial instruments, net of deferred income tax of $10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17
|
)
|
|
|
(17
|
)
|
Cumulative translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(527
|
)
|
|
|
(527
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2012
|
|
$
|
402
|
|
|
$
|
449,933
|
|
|
$
|
(232,439
|
)
|
|
$
|
243,699
|
|
|
$
|
6,084
|
|
|
$
|
467,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
6
ATMI, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2012
|
|
|
2011
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
15,285
|
|
|
$
|
19,141
|
|
Adjustments to reconcile net income to cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
13,349
|
|
|
|
13,572
|
|
Stock-based compensation expense
|
|
|
4,384
|
|
|
|
4,130
|
|
Other
|
|
|
1,638
|
|
|
|
1,991
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(13,786
|
)
|
|
|
412
|
|
Inventories
|
|
|
(9,266
|
)
|
|
|
(5,149
|
)
|
Other assets
|
|
|
679
|
|
|
|
(412
|
)
|
Accounts payable
|
|
|
10,196
|
|
|
|
311
|
|
Accrued expenses, income taxes and other liabilities
|
|
|
8,900
|
|
|
|
(3,131
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
31,379
|
|
|
|
30,865
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(13,208
|
)
|
|
|
(9,115
|
)
|
Purchases of marketable securities
|
|
|
(39,495
|
)
|
|
|
(62,176
|
)
|
Proceeds from sales or maturities of marketable securities
|
|
|
41,594
|
|
|
|
53,371
|
|
Acquisitions of cost-basis investments
|
|
|
|
|
|
|
(6,746
|
)
|
Other
|
|
|
97
|
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
Net cash used for investing activities
|
|
|
(11,012
|
)
|
|
|
(24,617
|
)
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
Purchases of treasury stock
|
|
|
(1,266
|
)
|
|
|
(824
|
)
|
Proceeds from exercise of stock options
|
|
|
702
|
|
|
|
762
|
|
Other
|
|
|
(18
|
)
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used for financing activities
|
|
|
(582
|
)
|
|
|
(84
|
)
|
|
|
|
|
|
|
|
|
|
Effects of exchange rate changes on cash and cash equivalents
|
|
|
319
|
|
|
|
(633
|
)
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
20,104
|
|
|
|
5,531
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
34,523
|
|
|
|
68,648
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
54,627
|
|
|
$
|
74,179
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
7
Notes To Consolidated Interim Financial Statements
(unaudited)
1. Description of Business
ATMI, Inc. (together with its subsidiaries, collectively referred to as the Company, ATMI, or we)
believes it is among the leading suppliers of high performance materials, materials packaging and materials delivery systems used worldwide in the manufacture of microelectronics devices. Our Microelectronics segment products consist of
front-end semiconductor performance materials, sub-atmospheric pressure gas delivery systems for safe handling and delivery of toxic and hazardous gases to semiconductor process equipment, and high-purity materials packaging and
dispensing systems that allow for the reliable introduction of low volatility liquids to microelectronics processes. ATMI targets semiconductor and flat-panel display manufacturers, whose products form the foundation of microelectronics technology
rapidly proliferating through the consumer products, information technology, automotive, and communications industries. The market for microelectronics devices is continually changing, which drives demand for new products and technologies that have
improved performance at lower cost. ATMIs customers include many of the leading semiconductor manufacturers in the world who target leading-edge technologies. In our LifeSciences segment, ATMI also addresses an increasing number of critical
materials handling needs for the life sciences markets. Our proprietary containment, mixing, and bioreactor technologies are sold to the biotechnology, vaccine, laboratory and cell therapy markets, which we believe offer significant growth
potential. ATMIs objective is to meet the demands of our microelectronics and life sciences customers with solutions that maximize the efficiency and safety of their manufacturing processes, reduce capital or operating costs, and minimize the
time to develop new products and integrate them into their processes.
2. Basis of Presentation and Other Information
Basis of Presentation
The accompanying consolidated interim financial statements of ATMI, Inc. at June 30, 2012 and for the three and six months ended June 30, 2012
and 2011, respectively, are unaudited, but in the opinion of management include all adjustments necessary for a fair presentation of the results for the interim periods. The unaudited consolidated interim financial statements included herein should
be read in conjunction with the December 31, 2011 audited consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2011. The Companys quarterly
results are subject to fluctuation and, thus, the operating results for any quarter are not necessarily indicative of results to be expected for any future fiscal period.
The consolidated balance sheet at December 31, 2011 has been derived from the audited financial statements at that date, but does not include all of the financial information and disclosures required
by Generally Accepted Accounting Principles (GAAP) for complete financial statements.
8
Earnings Per Share
This table shows the computation of basic and diluted earnings per share (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
11,423
|
|
|
$
|
11,134
|
|
|
$
|
15,285
|
|
|
$
|
19,141
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share - weighted average shares
|
|
|
31,938
|
|
|
|
31,665
|
|
|
|
31,873
|
|
|
|
31,674
|
|
Dilutive effect of employee stock options
|
|
|
168
|
|
|
|
51
|
|
|
|
195
|
|
|
|
45
|
|
Dilutive effect of restricted stock
|
|
|
563
|
|
|
|
612
|
|
|
|
615
|
|
|
|
606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per common share weighted average shares
|
|
|
32,669
|
|
|
|
32,328
|
|
|
|
32,683
|
|
|
|
32,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share-basic
|
|
$
|
0.36
|
|
|
$
|
0.35
|
|
|
$
|
0.48
|
|
|
$
|
0.60
|
|
Earnings per share-diluted
|
|
$
|
0.35
|
|
|
$
|
0.34
|
|
|
$
|
0.47
|
|
|
$
|
0.59
|
|
This table shows the potential common shares excluded from the calculation of weighted-average shares outstanding because
their effect was considered to be antidilutive (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Antidilutive shares
|
|
|
1,154
|
|
|
|
1,045
|
|
|
|
951
|
|
|
|
1,060
|
|
9
Inventories
Inventories include (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
2012
|
|
|
December 31,
2011
|
|
Raw materials
|
|
$
|
18,666
|
|
|
$
|
20,508
|
|
Work in process
|
|
|
2,516
|
|
|
|
1,681
|
|
Finished goods
|
|
|
63,240
|
|
|
|
53,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,422
|
|
|
|
76,175
|
|
Excess and obsolescence reserve
|
|
|
(2,907
|
)
|
|
|
(2,553
|
)
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
$
|
81,515
|
|
|
$
|
73,622
|
|
|
|
|
|
|
|
|
|
|
Non-marketable Equity Securities
We selectively invest in non-marketable equity securities of private companies, which range from early-stage companies to more mature companies whose products or technologies may directly support an ATMI
product or initiative. At June 30, 2012, the carrying value of our portfolio of strategic investments in non-marketable equity securities totaled $8.5 million ($8.0 million at December 31, 2011), of which $5.3 million are accounted
for at cost ($4.6 million at December 31, 2011), and $3.2 million are accounted for using the equity method of accounting ($3.4 million at December 31, 2011). Non-marketable equity securities are included in the consolidated balance sheets
under the caption Other non-current assets. ATMIs share of the income or losses of all equity-method investees, using the most current financial information available, which is one month behind ATMIs normal closing date, is
included in our results of operations from the investment date forward.
Income Taxes
We have not provided for U.S. federal income and foreign withholding taxes on approximately $99.8 million of undistributed earnings from non-U.S.
operations as of June 30, 2012, because such earnings are intended to be reinvested indefinitely outside of the United States. These earnings could become subject to additional tax if they are remitted as dividends, loaned to ATMI, or upon sale
of subsidiary stock. It is not practicable to estimate the amount or timing of the additional tax, if any, that eventually might be paid on the foreign earnings.
We had an effective income tax rate of 31.9 percent and 33.4 percent for the three and six month periods ended June 30, 2012, respectively. The effective income tax rate differs from the U.S. federal
statutory income tax rate of 35.0 percent primarily due to the mix of income attributable to the various countries in which we conduct business, the increase in the valuation allowance on certain foreign losses, and the impact of our reserves. Our
effective income tax rate is calculated based on full-year assumptions and is affected by the mix of income attributable to the various countries in which we conduct business, and excludes any benefit associated with the U.S. Federal research and
development (R&D) credit which was not renewed at the end of 2011. In
10
the first six months of 2012, if a tax benefit had been reflected on the foreign losses, and the U.S. Federal R&D credit had been taken into account, our effective income tax rate would have
been approximately 27.0 percent.
At June 30, 2012, the Company had $4.2 million of unrecognized tax benefits, which if recognized, would
favorably affect the effective income tax rate in future periods. $0.3 million of this amount is included in deferred taxes, and the balance of $3.9 million is included in the caption Other non-current liabilities on the Consolidated
Balance Sheets, together with $0.5 million of accrued interest (net) on tax reserves and $0 accrued for penalties.
It is reasonably possible
that in the next 12 months, because of changes in facts and circumstances, the unrecognized tax benefits for tax positions taken related to previously filed tax returns may decrease. The range of possible decrease is $0 million to $1.3 million
(excluding interest). In January 2012, the Internal Revenue Service completed a U.S. tax audit of tax years 2008 and 2009 although the refund claim for tax year 2009 is still subject to review by the Joint Committee on Taxation.
Goodwill and Other Intangible Assets
Goodwill and Other intangible asset balances at June 30, 2012 and December 31, 2011 were (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
Patents &
Trademarks
|
|
|
Other
|
|
|
Total Other
Intangibles
|
|
Gross amount as of December 31, 2011
|
|
$
|
46,546
|
|
|
|
|
$
|
49,404
|
|
|
$
|
13,195
|
|
|
$
|
62,599
|
|
Accumulated amortization
|
|
|
|
|
|
|
|
|
(25,338
|
)
|
|
|
(690
|
)
|
|
|
(26,028
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2011
|
|
$
|
46,546
|
|
|
|
|
$
|
24,066
|
|
|
$
|
12,505
|
|
|
$
|
36,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amount as of June 30, 2012
|
|
$
|
46,252
|
|
|
|
|
$
|
49,066
|
|
|
$
|
11,015
|
|
|
$
|
60,081
|
|
Accumulated amortization
|
|
|
|
|
|
|
|
|
(26,989
|
)
|
|
|
(1,195
|
)
|
|
|
(28,184
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2012
|
|
$
|
46,252
|
|
|
|
|
$
|
22,077
|
|
|
$
|
9,820
|
|
|
$
|
31,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
Changes in carrying amounts of Goodwill and Other Intangibles for the six months ended June 30, 2012
were (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
Patents &
Trademarks
|
|
|
Other
|
|
|
Total Other
Intangibles
|
|
Balance at December 31, 2011
|
|
$
|
46,546
|
|
|
|
|
$
|
24,066
|
|
|
$
|
12,505
|
|
|
$
|
36,571
|
|
Amortization expense
|
|
|
|
|
|
|
|
|
(1,721
|
)
|
|
|
(507
|
)
|
|
|
(2,228
|
)
|
Other, including foreign currency translation
|
|
|
(294
|
)
|
|
|
|
|
(268
|
)
|
|
|
(2,178
|
)
|
|
|
(2,446
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2012 (1)
|
|
$
|
46,252
|
|
|
|
|
$
|
22,077
|
|
|
$
|
9,820
|
|
|
$
|
31,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Through June 30, 2012, the Company has recorded $2.2 million of adjustments, captured in the Other category, to decrease the value of the intangible
assets associated with the Companys SDS Direct transaction, originally recorded in October 2011 as part of the asset acquisition, because of cash recoveries from the seller.
|
Variable Interest Entity
We hold a
variable interest in the equity of Anji Microelectronics Co., Ltd. (Anji), an entity that produces advanced semiconductor materials, with primary operations in Shanghai, China. We have determined that we are not the primary beneficiary
of Anji because we do not have the power, through voting or similar rights, to direct the activities of Anji that most significantly impact the entitys economic performance, and we are also not expected to absorb significant losses or gains
from Anji. ATMIs carrying value of this cost basis investment is $3.9 million at June 30, 2012. The carrying value of our investment in Anji represents the cash paid, less our share of the cumulative losses during the period we used the
equity-method of accounting. At June 30, 2012, our maximum exposure to loss is $4.3 million, which consists of $3.9 million of our carrying value in this investment, plus a $0.4 million reserve for a put option.
12
3. Equity-Based Compensation
Summary of Plans
This
table shows the number of shares approved by stockholders for each plan and the number of shares that remain available for equity awards at June 30, 2012 (in thousands):
|
|
|
|
|
|
|
|
|
Stock Plan
|
|
# of Shares
Approved
|
|
|
# of
Shares
Available
|
|
2003 Stock Plan (1)
|
|
|
3,000
|
|
|
|
85
|
|
2010 Stock Plan (1)
|
|
|
3,000
|
|
|
|
2,569
|
|
Employee Stock Purchase Plan (2)
|
|
|
1,000
|
|
|
|
237
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
7,000
|
|
|
|
2,891
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Exercise prices for ISOs and non-qualified stock options granted under this plan may not be less than 100 percent of the fair market value for the Companys common
stock on the date of grant.
|
(2)
|
Employees may purchase shares at 95 percent of the closing price on the day previous to the last day of each six-month offering period. This plan is not considered to
be compensatory.
|
The Company issued 40,610 shares of common stock as a result of exercises by employees under its employee
stock option plans during the first six months of 2012. Such amount was 59,129 shares of common stock during the fiscal year ended December 31, 2011. The Company issued 227,465 shares of restricted stock that include solely a time-based vesting
requirement in the first six months of 2012 and such amount was 368,588 during the fiscal year ended December 31, 2011.
In the first six
months of 2012, as part of our executive officer long-term incentive compensation structure, the Company issued 77,858 awards of restricted stock units to its executive officers that consist of Total Shareholder Return Performance Restricted Stock
Unit Awards (PRSUs), compared to 101,325 shares of restricted stock issued to its executive officers that included both performance-based and time-based vesting requirements (PRSAs) during the fiscal year ended
December 31, 2011. The ultimate amount of shares issuable pursuant to PRSUs earned will be determined based on relative total stockholder return of the Companys stock versus the performance of the Russell 2000 index. PRSUs are initially
granted at a target level of achievement, with a payout potential, payable in common stock, of 0% to 175% of target. In the first six months of 2012, 49,462 of the 101,325 PRSAs granted in 2011 were earned (subject to time-based vesting), while
51,863 shares were forfeited and cancelled.
13
4. Marketable Securities
Marketable securities include at June 30, 2012 and December 31, 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
2011
|
|
|
|
|
|
|
Cost
|
|
|
Gross
Unrealized
Gain
(Loss)
|
|
|
Estimated
Fair
Value
|
|
|
Cost
|
|
|
Gross
Unrealized
Gain
(Loss)
|
|
|
Estimated
Fair Value
|
|
Securities in unrealized gain position:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
$
|
22,376
|
|
|
$
|
8,677
|
|
|
$
|
31,053
|
|
|
$
|
22,376
|
|
|
$
|
12,241
|
|
|
$
|
34,617
|
|
Corporate debt obligations
|
|
|
2,348
|
|
|
|
16
|
|
|
|
2,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government debt obligations (1)
|
|
|
11,533
|
|
|
|
21
|
|
|
|
11,554
|
|
|
|
22,612
|
|
|
|
69
|
|
|
|
22,681
|
|
GS (2) debt obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
|
|
6
|
|
|
|
7,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
36,257
|
|
|
|
8,714
|
|
|
|
44,971
|
|
|
|
51,988
|
|
|
|
12,316
|
|
|
|
64,304
|
|
Securities in unrealized loss position:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt obligations
|
|
|
1,992
|
|
|
|
(5
|
)
|
|
|
1,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government debt obligations
|
|
|
4,830
|
|
|
|
(2
|
)
|
|
|
4,828
|
|
|
|
4,437
|
|
|
|
(2
|
)
|
|
|
4,435
|
|
GS debt obligations
|
|
|
5,501
|
|
|
|
(3
|
)
|
|
|
5,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction-rate security
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,720
|
|
|
|
(1,391
|
)
|
|
|
3,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
12,323
|
|
|
|
(10
|
)
|
|
|
12,313
|
|
|
|
9,157
|
|
|
|
(1,393
|
)
|
|
|
7,764
|
|
Securities at amortized cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
|
16,649
|
|
|
|
|
|
|
|
16,649
|
|
|
|
6,893
|
|
|
|
|
|
|
|
6,893
|
|
Government debt obligations
|
|
|
750
|
|
|
|
|
|
|
|
750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
17,399
|
|
|
|
|
|
|
|
17,399
|
|
|
|
6,893
|
|
|
|
|
|
|
|
6,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities
|
|
$
|
65,979
|
|
|
$
|
8,704
|
|
|
$
|
74,683
|
|
|
$
|
68,038
|
|
|
$
|
10,923
|
|
|
$
|
78,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
State and municipal government debt obligations.
|
(2)
|
Government sponsored.
|
The amortized cost and
estimated fair value of available-for-sale securities, by contractual maturity, as of June 30, 2012 are shown below (in thousands); expected maturities may differ from contractual maturities because the issuers of the securities may exercise
the right to prepay obligations without prepayment penalties.
14
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
Estimated
Fair Value
|
|
Due in one year or less
|
|
$
|
33,762
|
|
|
$
|
33,781
|
|
Due between one and three years
|
|
|
9,841
|
|
|
|
9,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,603
|
|
|
|
43,630
|
|
Common stock
|
|
|
22,376
|
|
|
|
31,053
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
65,979
|
|
|
$
|
74,683
|
|
|
|
|
|
|
|
|
|
|
This table shows the Companys marketable securities that were in an unrealized loss position at June 30, 2012,
and also shows the duration of time the security had been in an unrealized loss position (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or Greater
|
|
|
Total
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
Corporate debt obligations
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,987
|
|
|
$
|
(5
|
)
|
|
$
|
1,987
|
|
|
$
|
(5
|
)
|
Government debt obligations
|
|
|
4,828
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
4,828
|
|
|
|
(2
|
)
|
GS (1) debt obligations
|
|
|
|
|
|
|
|
|
|
|
5,498
|
|
|
|
(3
|
)
|
|
|
5,498
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,828
|
|
|
$
|
(2
|
)
|
|
$
|
7,485
|
|
|
$
|
(8
|
)
|
|
$
|
12,313
|
|
|
$
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Government sponsored.
|
See Note 6 for further
discussion.
15
5. Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income are (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency
Translation
Adjustments
|
|
|
Unrealized Gain
(Loss)
on
Available-for-
Sale Securities
|
|
|
Total
|
|
Balance at December 31, 2011
|
|
$
|
1,070
|
|
|
$
|
6,979
|
|
|
$
|
8,049
|
|
Reclassification adjustment related to marketable securities in net unrealized gain loss at prior period end, net of $504 tax
provision (1)
|
|
|
|
|
|
|
869
|
|
|
|
869
|
|
Change in fair value of available-for-sale securities, net of deferred income tax of $744
|
|
|
|
|
|
|
(2,290
|
)
|
|
|
(2,290
|
)
|
Change in fair value of derivative financial instruments, net of deferred income tax of $10
|
|
|
|
|
|
|
(17
|
)
|
|
|
(17
|
)
|
Cumulative translation adjustment
|
|
|
(527
|
)
|
|
|
|
|
|
|
(527
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2012
|
|
$
|
543
|
|
|
$
|
5,541
|
|
|
$
|
6,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Determined based on the specific identification method
|
6. Fair Value Measurements
The Company measures and reports financial assets and financial liabilities on a fair value basis, consistent with ASC 820 Fair
Value Measurements and Disclosures, using the following three categories for classification and disclosure purposes:
Level 1
Quoted prices in active markets for identical assets and liabilities. Level 1 assets and liabilities consist of
cash, money market fund deposits, time deposits, certain of our marketable equity instruments, and forward foreign currency exchange contracts that are traded in an active market with sufficient volume and frequency of transactions.
Level 2
Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices
in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for
substantially the full term of the assets or liabilities. Level 2 assets include certain of our marketable debt instruments with quoted market prices that are traded in less active markets or priced using a quoted market price for similar
instruments.
Level 3
Unobservable inputs to the valuation methodology that are significant to the measurement
of fair value of assets or liabilities.
16
In May 2012, we sold our only auction-rate security for $4.2 million resulting in a recognized loss of $0.5
million, which is included in the consolidated statements of comprehensive income in the caption Other expense, net.
Assets /
Liabilities Measured at Fair Value on a Recurring Basis
This table summarizes the Companys assets and liabilities measured at fair
value on a recurring basis at June 30, 2012 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measured Using
|
|
|
|
Total
|
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Cash & cash equivalents
|
|
$
|
54,627
|
|
|
$
|
54,627
|
|
|
|
|
|
|
|
|
|
Available-for-sale marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
$
|
31,053
|
|
|
$
|
31,053
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
$
|
16,649
|
|
|
$
|
16,649
|
|
|
|
|
|
|
|
|
|
Corporate debt obligations
|
|
$
|
4,351
|
|
|
|
|
|
|
$
|
4,351
|
|
|
|
|
|
Government debt obligations
|
|
$
|
17,132
|
|
|
|
|
|
|
$
|
17,132
|
|
|
|
|
|
Government sponsored debt obligations
|
|
$
|
5,498
|
|
|
|
|
|
|
$
|
5,498
|
|
|
|
|
|
Foreign currency exchange contract asset
|
|
$
|
322
|
|
|
$
|
322
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contract liability
|
|
$
|
(36
|
)
|
|
$
|
(36
|
)
|
|
|
|
|
|
|
|
|
During the first six months of 2012, our valuation methodologies were consistent with previous years, and there were no
transfers made among the three levels of the valuation hierarchy.
17
This table presents a reconciliation for all assets and liabilities measured at fair value on a recurring
basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2012 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
Significant Unobservable Inputs
(Level
3)
|
|
|
|
Available-For-
Sale Marketable
Securities
|
|
|
Total
|
|
Balance at December 31, 2011
|
|
$
|
3,329
|
|
|
$
|
3,329
|
|
Total losses, realized and unrealized:
|
|
|
|
|
|
|
|
|
Included in net income
|
|
|
(530
|
)
|
|
|
(530
|
)
|
Included in accumulated other comprehensive income
|
|
|
889
|
|
|
|
889
|
|
Deferred tax effect
|
|
|
510
|
|
|
|
510
|
|
Purchases, issuances, and settlements, net
|
|
|
(4,198
|
)
|
|
|
(4,198
|
)
|
Transfers into (out of) Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2012
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
Assets / Liabilities Measured at Fair Value on a Nonrecurring Basis
All assets and liabilities measured at fair value on a nonrecurring basis are categorized as Level 3, requiring significant management judgment due to the
absence of quoted market prices or observable inputs for assets of a similar nature.
Consistent with prior quarters, the liability for the
Artelis contingent consideration payments, which is classified as Level 3, and is tied to future revenue performance for the fiscal years 2012 through 2014, was calculated using unobservable inputs (primarily using discounted cash flow analyses, a
current average discount rate of 8.1 percent, and reliance on the market and product knowledge of internal experts). The contingent payments have a range of possible outcomes from $0 to $23.3 million.
Our estimate of the fair value of the contingent payments was $6.7 million at June 30, 2012, representing a reduction in our estimated payments of
$0.3 million from December 31, 2011 including $0.2 million of foreign currency translation impact. The benefit associated with the reduction has been reflected as a reduction of $0.3 million in SG&A expense for the six months ended
June 30, 2012.
Due to their nature, the carrying value of cash, receivables, and payables approximates fair value.
7. Foreign Currency Exchange Contracts
We use forward foreign currency exchange contracts to hedge specific or anticipated exposures relating to intercompany payments
(primarily U.S. export sales to subsidiaries at pre-established U.S. dollar prices), intercompany loans and other specific and identified exposures. The terms of
18
the forward foreign currency exchange contracts are matched to the underlying transaction being hedged. Because such contracts are directly associated with identified transactions, they are an
effective hedge against fluctuations in the value of the foreign currency underlying the transaction.
Changes in the fair value of economic
hedges are recognized in earnings as an offset to the change in the fair value of the underlying exposures being hedged. The changes in fair value of derivatives that are designated as cash-flow hedges are deferred in accumulated other comprehensive
income (loss) and are recognized in earnings when the underlying hedged transaction occurs. Any ineffectiveness is recognized in earnings immediately. We do not enter into derivative instruments for trading or speculative purposes and all of our
derivatives were highly effective throughout the periods reported.
Counterparties to forward foreign currency exchange contracts are major
banking institutions with credit ratings of investment grade or better and no collateral is required. There are no significant risk concentrations. We believe the risk of incurring losses on derivative contracts related to credit risk is remote.
At June 30, 2012, we held foreign currency exchange contracts, not designated as cash flow hedges, with notional amounts totaling $18.3
million of which $7.6 million will be settled in Euros, $1.5 million will be settled in Taiwan Dollars, and $9.2 million will be settled in Korean Won. At June 30, 2012, we held forward foreign currency exchange contracts designated as cash
flow hedges with notional amounts totaling $16.6 million, which will be settled in Japanese Yen. Changes in the fair market value (gain or loss) on these contracts were not significant as of June 30, 2012.
The Company recorded an immaterial net loss and a net gain of $0.7 million for the three and six months ended June 30, 2012, and net losses of $0.6
million and $0.9 million for the three and six months ended June 30, 2011, respectively, under the caption Other expense, net in the Consolidated Statements of Comprehensive Income related to changes in the fair value of the foreign
currency exchange contract economic hedges.
8. Commitments and Contingencies
ATMI is, from time to time involved in legal actions, governmental audits, and proceedings relating to various matters incidental to
its business including contract disputes, intellectual property disputes, product liability claims, employment matters, export and trade matters, and environmental claims. While the outcome of such matters cannot be predicted with certainty, in the
opinion of management, after reviewing such matters and consulting with ATMIs counsel and considering any applicable insurance or indemnifications, any liability which may ultimately be incurred is not expected to materially affect ATMIs
consolidated financial position, cash flows or results of operations.
As part of the Artelis acquisition, we recognized a liability for the
fair value of contingent payments tied to future revenue performance, which is currently valued at $6.7 million. The range of possible outcomes related to the contingent payment obligation is $0 to $23.3 million. See Note 6 for further discussion.
19
9. Segments
ATMI has two reportable operating segments, Microelectronics and LifeSciences. Our Chief Executive Officer regularly reviews financial
information which separately identifies each segments results.
The Microelectronics business unit sells high-purity
materials and materials delivery systems directly to integrated circuit manufacturers and to chemical suppliers for flat-panel display manufacturing. Microelectronics products consist of ATMIs patented Safe Delivery System
®
(SDS) solutions, copper integration and surface preparation products, deposition materials and
high-purity liquid materials packaging solutions. Microelectronics products represent the largest portion of ATMIs business and development activities. The principal drivers for this market are technical performance, yield improvement, time to
market, cost, utilization of capital, and risk reduction. The success of an electronic component or device is driven by the increased functionality it can deliver at an acceptable cost.
The life sciences industry has been using disposable components like filters, connectors, and disposable storage bags for several years; however, as customers migrate toward processes which combine
disposable components and integrate them into disposable systems we see growing opportunities. The LifeSciences business unit sells products that address an increasing number of critical process steps for the biotechnology, laboratory and cell
therapy markets, including disposable mixers and bioreactors, both considered growth opportunities for ATMI. This unit includes our Newform products and Integrity mixers, bioreactors and bioprocess vessels.
The Company evaluates performance and allocates resources based on profit or loss from operations. The accounting policies of the reportable segments are
the same as those described in the summary of significant accounting policies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (1)
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Microelectronics
|
|
$
|
94,563
|
|
|
$
|
94,574
|
|
|
$
|
178,018
|
|
|
$
|
184,475
|
|
LifeSciences
|
|
|
11,154
|
|
|
|
9,358
|
|
|
|
20,263
|
|
|
|
19,933
|
|
All Other
|
|
|
182
|
|
|
|
95
|
|
|
|
192
|
|
|
|
343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated
|
|
$
|
105,899
|
|
|
$
|
104,027
|
|
|
$
|
198,473
|
|
|
$
|
204,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Microelectronics
|
|
$
|
30,454
|
|
|
$
|
28,324
|
|
|
$
|
51,474
|
|
|
$
|
52,540
|
|
LifeSciences
|
|
|
(1,104
|
)
|
|
|
(1,867
|
)
|
|
|
(3,230
|
)
|
|
|
(2,326
|
)
|
All Other
|
|
|
(12,414
|
)
|
|
|
(11,009
|
)
|
|
|
(25,161
|
)
|
|
|
(23,108
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated
|
|
$
|
16,936
|
|
|
$
|
15,448
|
|
|
$
|
23,083
|
|
|
$
|
27,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Intersegment sales were not significant for the three and six month periods ended June 30, 2012 and 2011.
|
21
Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations.
Three and Six Months Ended June 30, 2012 as Compared to 2011
Cautionary Statements Under the Private Securities Litigation Reform Act of 1995
Disclosures included in this Form 10-Q contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements may be identified by words such as anticipate, plan, believe, seek, estimate, expect, could,
and words of similar meanings and include, without limitation, statements about the expected future business and financial performance of ATMI such as financial projections, expectations for demand and sales of new and existing products, customer
and supplier relationships, research and development programs, market and technology opportunities, international trends, business strategies, business opportunities, objectives of management for future operations, microelectronics industry
(including wafer start) growth, and trends in the markets in which the Company participates. Forward-looking statements are based on managements current expectations and assumptions, which are inherently subject to uncertainties, risks and
changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially from these expectations and assumptions because of changes in political, economic, business, competitive, market, regulatory, and other
factors. Certain factors that could cause such positive or negative differences include:
|
|
|
variation in profit margin caused by increases or decreases in shipment volume, product quality issues, reductions in, or obsolescence of, inventory,
inefficiencies in production facilities and shifts in product mix;
|
|
|
|
cyclicality in the markets in which we operate;
|
|
|
|
disruptions in global credit and financial markets, including severely diminished liquidity and credit availability, declines in consumer confidence,
declines in economic growth, increases in unemployment rates, inflationary or deflationary pressures, and uncertainty about economic stability;
|
|
|
|
aggressive management of inventory levels by our customers and their customers;
|
|
|
|
availability of supply from a single or limited number of suppliers or from suppliers in a single country;
|
|
|
|
highly competitive markets for our products;
|
|
|
|
inability to realize our anticipated gains from investments in new technology;
|
|
|
|
changes in export controls, environmental and other laws or policies, as well as the general political and economic conditions, exchange rate
fluctuations, security risks, health conditions and possible disruptions in transportation networks, of the various countries in which we operate;
|
|
|
|
potential natural disasters in locations where we, our customers, or our suppliers operate;
|
|
|
|
climate change and compliance with climate change related country regulations:
|
|
|
|
loss, or significant curtailment, of purchases by one or more of our largest customers;
|
|
|
|
customer-driven pricing pressures adversely affecting our average selling prices and margin;
|
|
|
|
inability to meet customer demand from quarter to quarter, causing us to incur expedited shipping costs or hold excess or obsolete inventory;
|
22
|
|
|
customer-driven manufacturing efficiencies resulting in the dilution of our materials on their tools or extension of the bath-life that our materials
are used in, both of which could negatively impact our revenues
|
|
|
|
changing tax laws, taxation and audit by taxing authorities in the various countries in which we operate;
|
|
|
|
competition for highly skilled scientific, technical, managerial and marketing personnel;
|
|
|
|
inability to continue to anticipate rapidly changing technologies and market trends, to enhance our existing products and processes, to develop and
commercialize new products and processes, and to expand through selected acquisitions of technologies or businesses or other strategic alliances;
|
|
|
|
inability to protect our competitive position via our patents, patent applications, and licensed technology in the United States and other countries;
restrictions on our ability to make and sell our products as a result of competitors patents; costly and time-consuming patent litigation;
|
|
|
|
risk of product liability claims beyond existing insurance coverage levels resulting from the manufacture and sale of our products, which include thin
film and other toxic materials;
|
|
|
|
inability to realize the anticipated benefits of acquisitions due to difficulties integrating acquired businesses with our current operations;
|
|
|
|
fluctuations in currency exchange rates;
|
|
|
|
risk of information technology system failures which could lead to security breaches, loss of data or network disruptions;
|
|
|
|
governmental regulations related to the storage, use, and disposal of certain toxic or otherwise hazardous chemicals in our manufacturing, processing
and research and development activities, as well as regulations applicable to both operators and owners of property where releases of hazardous substances may have occurred (including releases by prior occupants); and
|
|
|
|
uncertainty regarding compliance matters and higher costs resulting from changing laws, regulations and standards relating to corporate governance and
public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and new regulations from the SEC.
|
These risks and uncertainties are described in more detail in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, and our
other subsequent filings with the Securities and Exchange Commission (SEC) and in materials incorporated by reference in these filings. Like other companies, we are susceptible to macroeconomic downturns in the United States or abroad that may
affect the general economic climate and our performance and the performance of our customers. The price of our common stock is subject to volatility due to fluctuations in general market conditions, differences in our results of operations from
estimates and projections generated by the investment community, and other factors beyond our control. ATMI undertakes no obligation to update publicly or review any forward-looking statements, whether as a result of new information, future
developments or otherwise, except as required by law.
23
Company Overview
ATMI, Inc. (together with its subsidiaries, collectively referred to as the Company, ATMI, or we) believes it is among the leading suppliers of high performance
materials, materials packaging and materials delivery systems used worldwide in the manufacture of microelectronics devices. Our Microelectronics segment products consist of front-end semiconductor performance materials, sub-atmospheric
pressure gas delivery systems for safe handling and delivery of toxic and hazardous gases to semiconductor process equipment, and high-purity materials packaging and dispensing systems that allow for the reliable introduction of low volatility
liquids to microelectronics processes. ATMI targets semiconductor and flat-panel display manufacturers, whose products form the foundation of microelectronics technology rapidly proliferating through the consumer products, information technology,
automotive, and communications industries. The market for microelectronics devices is continually changing, which drives demand for new products and technologies that have improved performance at lower cost. ATMIs customers include many of the
leading semiconductor manufacturers in the world who target leading-edge technologies. In our LifeSciences segment, ATMI also addresses an increasing number of critical materials handling needs for the life sciences markets. Our proprietary
containment, mixing, and bioreactor technologies are sold to the biotechnology, vaccine, laboratory and cell therapy markets, which we believe offer significant growth potential. ATMIs objective is to meet the demands of our microelectronics
and life sciences customers with solutions that maximize the efficiency and safety of their manufacturing processes, reduce capital or operating costs, and minimize the time to develop new products and integrate them into their processes.
Results of Operations
The
following table provides a summary of consolidated results of operations for the three and six months ended June 30, 2012 and 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
% Change
|
|
|
2012
|
|
|
2011
|
|
|
% Change
|
|
Revenues
|
|
$
|
105,899
|
|
|
$
|
104,027
|
|
|
|
1.8
|
%
|
|
$
|
198,473
|
|
|
$
|
204,751
|
|
|
|
(3.1
|
%)
|
Cost of revenues
|
|
|
52,425
|
|
|
|
54,565
|
|
|
|
(3.9
|
%)
|
|
|
100,817
|
|
|
|
107,198
|
|
|
|
(6.0
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
53,474
|
|
|
|
49,462
|
|
|
|
8.1
|
%
|
|
|
97,656
|
|
|
|
97,553
|
|
|
|
0.1
|
%
|
Gross profit margin
|
|
|
50.5
|
%
|
|
|
47.5
|
%
|
|
|
|
|
|
|
49.2
|
%
|
|
|
47.6
|
%
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
13,825
|
|
|
|
14,251
|
|
|
|
(3.0
|
%)
|
|
|
28,314
|
|
|
|
27,702
|
|
|
|
2.2
|
%
|
Selling, general and administrative
|
|
|
22,713
|
|
|
|
19,763
|
|
|
|
14.9
|
%
|
|
|
46,259
|
|
|
|
42,745
|
|
|
|
8.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
36,538
|
|
|
|
34,014
|
|
|
|
7.4
|
%
|
|
|
74,573
|
|
|
|
70,447
|
|
|
|
5.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
16,936
|
|
|
|
15,448
|
|
|
|
9.6
|
%
|
|
|
23,083
|
|
|
|
27,106
|
|
|
|
(14.8
|
%)
|
Interest income
|
|
|
305
|
|
|
|
289
|
|
|
|
5.5
|
%
|
|
|
630
|
|
|
|
713
|
|
|
|
(11.6
|
%)
|
Other expense, net
|
|
|
(457
|
)
|
|
|
(8
|
)
|
|
|
(5,612.5
|
%)
|
|
|
(763
|
)
|
|
|
(132
|
)
|
|
|
(478.0
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
16,784
|
|
|
|
15,729
|
|
|
|
6.7
|
%
|
|
|
22,950
|
|
|
|
27,687
|
|
|
|
(17.1
|
%)
|
Provision for income taxes
|
|
|
5,361
|
|
|
|
4,595
|
|
|
|
16.7
|
%
|
|
|
7,665
|
|
|
|
8,546
|
|
|
|
(10.3
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
31.9
|
%
|
|
|
29.2
|
%
|
|
|
|
|
|
|
33.4
|
%
|
|
|
30.9
|
%
|
|
|
|
|
Net income
|
|
$
|
11,423
|
|
|
$
|
11,134
|
|
|
|
2.6
|
%
|
|
$
|
15,285
|
|
|
$
|
19,141
|
|
|
|
(20.1
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Consolidated Summary
Second quarter 2012 revenue of $105.9 million increased by 1.8 percent compared to the second quarter of 2011 driven primarily by the positive contribution from the SDS Direct Transaction which was
completed last year and single-use growth in our LifeSciences segment.
Revenues for the first half of 2012 were $198.5 million, down 3.1
percent compared to the first half of 2011, driven by the reduction in our Microelectronics segment which was caused by weaker copper materials sales due to improved materials efficiency by our customers and reduced flat panel display sales
partially offset by increased SDS Direct revenue. Lower Microelectronics revenue was partially offset by growth in our LifeSciences segment due to strong bioreactor and mixing-related consumable sales.
Consolidated gross profit margin in the second quarter of 2012 was 50.5 percent, an increase of 3 percentage points compared to the prior year quarter.
The main driver in the second quarter of 2012 was the increased SDS volumes resulting from current year direct sales at higher contribution margins compared to 2011.
Consolidated gross profit margin for the first half of 2012 was 49.2 percent, an increase of 1.6 percentage points over the same period in 2011, driven by improved contribution margins from SDS.
Research and development (R&D) expense decreased 3.0 percent to $13.8 million in the second quarter of 2012 from $14.3
million in the second quarter of 2011. The decrease in R&D spending was caused by reduced employee incentive compensation ($0.7 million).
R&D expense for the first half of 2012 increased 2.2 percent to $28.3 million driven by increases in spending on prototypes, consulting, and patents,
partially offset by cost reimbursements related to a collaborative development agreement and reduced employee incentives.
Sales,
general & administrative (SG&A) expenses increased 14.9 percent to $22.7 million in the second quarter of 2012 from $19.8 million in the second quarter of 2011. The increase was driven by severance ($0.7 million), increased
SDS Direct costs ($1.1 million) and prior year one-time benefits recognized for capital-based tax credits of $1.2 million and a gain on the estimated fair value of contingent consideration of $0.9 million, partially offset by lower employee-related
cost of $0.6 million (reduced employee incentive compensation of $1.6 million partially offset by increased salaries of $0.9 million).
For
the six months ended June 30, 2012, SG&A expense increased 8.2 percent to $46.3 million compared to the same period of 2011 driven by increased consulting as we seek to more rapidly commercialize certain new products ($0.8 million),
increased SDS Direct costs ($2.0 million), severance ($1.1 million), increased employee costs of $2.0 million (salaries $1.5 million and equity compensation $0.5 million) and increased travel ($0.6 million) and the previously mentioned capital-based
tax credit of $1.2 million, partially offset by reduced employee incentives ($2.5 million).
25
Operating income increased 9.6 percent to $16.9 million in the second quarter of 2012 compared to the second
quarter of 2011, driven by the factors noted above.
For the first half of 2012, operating income declined 14.8 percent to $23.1 million.
Interest income was flat in the second quarter of 2012 compared to the second quarter of 2011 and was also flat for the six months ended June
2012 compared to June 2011.
In the second quarter of 2012, other expense, net, was $0.5 million driven by the $0.5 million recognized loss on
the sale of an Auction Rate Security.
Our effective income tax rate was 31.9 percent and 33.4 percent for the three and six month periods
ended June 30, 2012, respectively. Our effective income tax rate is calculated based on full-year assumptions and is affected by the mix of income attributable to the various countries in which we conduct business, the increase in the valuation
allowance on certain foreign losses, such as Artelis, and the impact of our reserves. It excludes the benefit of the U.S. Federal R&D credit which expired at the end of 2011. In the first six months of 2012, if a tax benefit had been reflected
on the foreign losses, and the U.S. Federal R&D credit had been taken into account, our effective income tax rate would have been approximately 27.0 percent.
SDS Direct Transition
Revenues in the second quarter of 2012 included a net positive
impact of $5.8 million associated with the SDS Direct transaction. We recognized incremental revenues of $7.7 million from regions that are fully transitioned, which was partially offset by $0.8 million of payments to repurchase previously
recognized product shipments into our former distributors channel, as well as an estimated $1.1 million impact due to excess inventory in the SDS distribution channel in regions where the former distributor continued to sell product until ATMI
secured the appropriate licenses to fully conduct business. We spent $0.2 million on incremental cost of revenues associated with integration related activities in the second quarter of 2012. We continue to anticipate that the financial benefits
disclosed as part of our SDS Direct announcement in November 2011 will be realized. Going forward, we expect increased revenues of $7 million to $8 million per quarter; an approximately 2 percent improvement in gross margins, a $1 million to $2
million increase to selling, general and administrative (SG&A) expense per quarter, and $0.08 to $0.09 of incremental quarterly earnings per diluted share, compared to our pre-transaction run rate.
26
Segment Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
%
Change
|
|
|
2012
|
|
|
2011
|
|
|
%
Change
|
|
Microelectronics
|
|
$
|
94,563
|
|
|
$
|
94,574
|
|
|
|
|
|
|
$
|
178,018
|
|
|
$
|
184,475
|
|
|
|
(3.5
|
%)
|
LifeSciences
|
|
|
11,154
|
|
|
|
9,358
|
|
|
|
19.2
|
%
|
|
|
20,263
|
|
|
|
19,933
|
|
|
|
1.7
|
%
|
All Other
|
|
|
182
|
|
|
|
95
|
|
|
|
91.6
|
%
|
|
|
192
|
|
|
|
343
|
|
|
|
(44.0
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated
|
|
$
|
105,899
|
|
|
$
|
104,027
|
|
|
|
1.8
|
%
|
|
$
|
198,473
|
|
|
$
|
204,751
|
|
|
|
(3.1
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
%
Change
|
|
|
2012
|
|
|
2011
|
|
|
%
Change
|
|
Microelectronics
|
|
$
|
30,454
|
|
|
$
|
28,324
|
|
|
|
7.5
|
%
|
|
$
|
51,474
|
|
|
$
|
52,540
|
|
|
|
(2.0
|
%)
|
LifeSciences
|
|
|
(1,104
|
)
|
|
|
(1,867
|
)
|
|
|
40.9
|
%
|
|
|
(3,230
|
)
|
|
|
(2,326
|
)
|
|
|
(38.9
|
%)
|
All Other
|
|
|
(12,414
|
)
|
|
|
(11,009
|
)
|
|
|
(12.8
|
%)
|
|
|
(25,161
|
)
|
|
|
(23,108
|
)
|
|
|
(8.9
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated
|
|
$
|
16,936
|
|
|
$
|
15,448
|
|
|
|
9.6
|
%
|
|
$
|
23,083
|
|
|
$
|
27,106
|
|
|
|
(14.8
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Microelectronics
: Revenues remained flat at $94.6 million in the second quarter of 2012 compared to the second
quarter of 2011. The growth we experienced as a result of increased SDS revenues was offset by our copper materials product lines which declined approximately 4 percent in the second quarter of 2012 compared to the second quarter of 2011. Copper
declines were driven by lower volume in our photo-etch cleans products as customers extended bath lives of certain chemistries partially offset by strength in our surface preparation cleans products. Given the ongoing and normal pressures to bring
costs down in the consumer and microelectronics industries, we continue to experience pricing pressure with several of our legacy products, including SDS, high-purity packaging, photo and copper materials. Gross profit margins in our
microelectronics product lines were approximately 52 percent in the second quarter of 2012 compared to approximately 50 percent in the second quarter of 2011. Gross profit margins benefited from improved contribution margins from the SDS direct
transaction. Operating income was $30.5 million in the second quarter of 2012 compared to $28.3 million in the second quarter of 2011 driven by SDS Direct growth.
Revenues for the six months ended June 30, 2012 were $178.0 million, down 3.5 percent compared to the same period in 2011, driven primarily by weaker copper materials sales due to improved materials
efficiency by our customers and reduced flat panel display sales partially offset by increased SDS Direct revenue. Operating income declined by 2.0 percent to $51.5 million driven primarily by the revenue decline.
LifeSciences
: Revenues grew 19.2 percent in the second quarter of 2012 to $11.2 million compared to $9.4 million in the second quarter of 2011,
primarily as a result of strong bioreactor and mixing-related consumable sales. Gross profit margins in our Life Sciences product lines were approximately 38 percent in the second quarter of 2012 compared to 27 percent in the
27
second quarter of 2011. The improvement in 2012 was driven by product mix toward our newer products and the incremental contribution margin from increased revenues. Operating loss was $1.1
million in the second quarter of 2012 compared to $1.9 million in the second quarter of 2011 driven by continued R&D and SG&A spending in support of iCellis and Xpansion bioreactor commercialization efforts.
LifeSciences revenues for the six months ended June 30, 2012 of $20.3 million were up 1.7 percent compared to the first half of 2011. The first half
of 2011 results included licensing revenues that related to a settlement of periods prior to 2011. Excluding the impact of the one-time licensing revenues, revenues would have been up 13.3 percent. Operating loss for the first six months of 2012 was
$3.2 million compared to $2.3 million in the first half of 2011, an increase of 38.9 percent. The increased loss was driven by licensing revenues reductions and continued R&D and SG&A spending in support of iCellis and Xpansion
bioreactor commercialization efforts.
28
Liquidity and Capital Resources
We assess liquidity in terms of our ability to generate cash to fund our operating and investing activities. Of particular importance to management are cash flows generated by operating activities, cash
used for capital expenditures, and cash used for acquisitions.
Until required for use in the business, we invest our cash reserves in bank
deposits, certificates of deposit, money market securities, government and government-sponsored bond obligations, corporate debt obligations, and other interest bearing marketable debt instruments in accordance with our investment policy. We have
contracted with investment advisers to invest our funds consistent with our investment policy. The value of our investments may be adversely affected by increases in interest rates, instability in the global financial markets that reduces the
liquidity of securities included in our portfolio, and by other factors which may result in other-than-temporary declines in value of the investments, which could impact our financial position and our overall liquidity. Each of these events may
cause us to record charges to reduce the carrying value of our investment portfolio or sell investments for less than our acquisition cost. We attempt to mitigate these risks with the assistance of our investment advisors by investing in
high-quality securities and monitoring the overall risk profile of our portfolio. We also maintain a well-diversified portfolio that limits our credit exposure through concentration limits set within our investment policy.
We have financed our operating needs and capital expenditures through cash flows from our operations, and existing cash. We expect to continue to finance
current and planned operating requirements principally through cash from operations, as well as existing cash resources. We believe that these funds will be sufficient to meet our operating requirements for the foreseeable future. However, we may,
from time to time, seek additional funding through a combination of equity and debt financings or from other sources.
We continue to invest
in R&D to provide future sources of revenue through the development of new products, as well as through additional uses for existing products. We consider R&D and the development of new products and technologies an integral part of our
growth strategy and a core competency of the Company. Likewise, we continue to make capital expenditures in order to expand and modernize manufacturing and R&D facilities around the globe and to drive efficiencies throughout the organization.
Additionally, management considers, on a continuing basis, potential acquisitions of strategic technologies and businesses complementary to the Companys current business.
29
A summary of our cash flows follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2012
|
|
|
2011
|
|
Cash provided by (used for):
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
31,379
|
|
|
$
|
30,865
|
|
Investing activities
|
|
|
(11,012
|
)
|
|
|
(24,617
|
)
|
Financing activities
|
|
|
(582
|
)
|
|
|
(84
|
)
|
Effects of exchange rate changes on cash and cash equivalents
|
|
|
319
|
|
|
|
(633
|
)
|
Operating Activities
During the six months ended June 30, 2012, we generated $31.4 million of cash from operations, which represents an increase of $0.5 million from the $30.9 million generated from operations during the
six months ended June 30, 2011. The cash generated from operations was driven by net income and increased accounts payable, partially offset by increased accounts receivable and cash used for the purchase of inventories. Inventories increased
by $7.9 million in the first six months of 2012 driven by the SDS Direct finished goods inventories. The increase in accounts payable of $10.4 million in the first six months of 2012 was primarily driven by an increase in SDS direct related
purchases. Accounts receivable increased by $13.5 million primarily as a result of increased SDS Direct revenues and longer payment terms associated with agreements assumed from the former SDS distributor.
Investing Activities
Net cash used for
investing activities decreased by $13.6 million in the six months ended June 30, 2012 to $11.0 million versus the six months ended June 30, 2011. Our investing activities primarily relate to purchases of property, plant and equipment, and
purchases, sales and maturities of marketable securities, including $4.2 million in cash received from the sale of an auction rate security. The reduction in cash used for investing activities was due to the lack of acquisition activity in 2012,
partially offset by a decline in purchases of marketable securities.
Financing Activities
Financing activities resulted in a use of cash of $0.6 million in the first six months of 2012, which was an increase of $0.5 million in cash used versus
the first six months of 2011. The increase was primarily related to purchases of treasury stock associated with the vesting of equity awards.
30
Critical Accounting Estimates
There have been no material changes from the methodologies applied by management for critical accounting estimates previously disclosed in ATMIs most recent Annual Report on Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
. As of June 30, 2012, the Companys cash and cash equivalents and marketable securities included bank deposits, time
deposits, money market securities, corporate debt obligations, and government and government-sponsored bond obligations. As of June 30, 2012, an increase of 100 basis points or a reduction of 100 basis points in interest rates on securities
with maturities greater than one year would not have a material impact on the fair value of the Companys marketable securities.
Foreign Currency Exchange Risk
. Most of the Companys sales are denominated in U.S. dollars and as a result, the Company has limited exposure
to foreign currency exchange risk with respect to sales made. Approximately 48 percent of the Companys revenues for the three and six months ended June 30, 2012 were denominated in Japanese Yen (JPY), Korean Won
(KRW), and Euros (EUR), but a majority of the product is sourced in U.S. dollars. Management periodically reviews the Companys exposure to currency fluctuations. This exposure may change over time as business practices
evolve and could have a material effect on the Companys financial results in the future. We use forward foreign exchange contracts to hedge specific exposures relating to intercompany receivables and payables and anticipated, but not yet
committed, sales from our U.S. entity to a Japanese customer denominated in JPY. The terms of the forward foreign exchange contracts are generally matched to the underlying transaction being hedged, and are typically under one year.
Because such contracts are directly associated with identified transactions, they are an effective hedge against fluctuations in the value of the foreign
currency underlying the transaction. We recognize in earnings (other income (expense), net) changes in the fair value of all derivatives that are designated as economic hedges and recognize in accumulated other comprehensive income any changes in
fair value of all derivatives designated as cash flow hedges that are highly effective and meet the other related accounting requirements. Gains and losses associated with contracts designated as cash flow hedges are recognized in earnings when the
underlying hedged transaction occurs. Further, we do not enter into derivative instruments for trading or speculative purposes and all of our derivatives were highly effective throughout the periods reported.
At June 30, 2012, we held forward foreign currency exchange contracts, not designated as cash flow hedges, with notional amounts totaling $18.3
million and forward foreign currency exchange contracts designated as cash flow hedges with notional amounts totaling $16.6 million, which are being used to hedge recorded foreign denominated assets and liabilities which will be settled in either
JPY, KRW, EUR, or New Taiwan Dollars (NTD). Holding other variables constant, if there were a 10 percent decline in foreign exchange rates against the US dollar for the JPY, KRW, EUR and NTD, the fair market value of the foreign exchange
contracts outstanding at June 30, 2012 would decrease by approximately a net of $1.4 million ($0.4 million would be expected to be fully offset by foreign exchange gains on the amount being hedged, and a loss of $1.8 million would be reported
in accumulated other comprehensive income, until the forecasted hedged transactions occurred). The effect of an immediate 10 percent change in other foreign exchange rates would not be expected to have a material effect on the Companys future
operating results or cash flows.
31
Item 4. Controls and Procedures
Our management, with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), has evaluated the
effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-Q. There are inherent limitations to the effectiveness of
any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable
assurance of achieving their control objectives. Based upon this evaluation, our CEO and CFO concluded that, as of the end of the period covered by this Form 10-Q, our disclosure controls and procedures were effective in that they provided
reasonable assurance that the information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and
that it is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
We routinely review our internal control over financial reporting and from time to time make changes intended to enhance the effectiveness of our internal control over financial reporting. There have been
no changes to our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the quarter ended June 30, 2012 we believe materially affected, or will be reasonably likely to
materially affect, our internal control over financial reporting.
32
PART II- OTHER INFORMATION
Item 1.
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Legal Proceedings
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ATMI is, from time to
time, involved in legal actions, governmental audits, and proceedings relating to various matters incidental to its business including contract disputes, intellectual property disputes, product liability claims, employment matters, export and trade
matters, and environmental claims. While the outcome of such matters cannot be predicted with certainty, in the opinion of management, after reviewing such matters and consulting with ATMIs counsel and considering any applicable insurance or
indemnifications, any liability which may ultimately be incurred is not expected to materially affect ATMIs consolidated financial position, cash flows or results of operations.
There have been no material
changes to the Risk Factors, which are described in more detail in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, and our other subsequent filings with the Securities and Exchange Commission and in materials
incorporated by reference in these filings. See also Cautionary Statements Under the Private Securities Litigation Reform Act of 1995 within this Form 10-Q.
Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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Purchases of Equity Securities There were no share repurchases during the three months ended June 30, 2012 of any of our securities registered under Section 12 of the Exchange Act, by or
on behalf of us, or any affiliated purchaser. We withheld 3,291 shares (at an average price of $19.98 per share) through net share settlements during the three months ended June 30, 2012, upon the vesting of restricted stock awards, to cover
minimum tax withholding obligations.
33
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31.1
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Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2
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Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32
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Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101
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Interactive data files pursuant to Rule 405 of Regulation S-T.
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34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
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ATMI, Inc.
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July 25, 2012
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By
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/s/ Timothy C. Carlson
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Timothy C. Carlson
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Executive Vice President,
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Chief Financial Officer and Treasurer
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By
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/s/ David M.
Ward
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David M. Ward
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Vice President, Controller and Principal
Accounting Officer
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35
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